The Tata Trusts on Monday announced a reorganisation plan for the Tata Sons Private Limited (TSPL) in its bid to prevent public listing of the company. The Trusts said the rejig was meant to ensure that the “reorganised entity” would neither be a Non-Banking Financial Company (NBFC) nor a Core Investment Company (CIC).
Tata Sons and Tata Trusts, which own 65.9% of Tata Sons, have developed major differences on the issue of public listing over the past few days. Trusts chairman Noel Tata, who is strictly against listing the firm by revenue, has told the board that he would block any such move.
The company was pushed towards a stock-market listing after the Reserve Bank of India rejected an application from Tata Sons to deregister as a non-bank lender earlier this month. However, Tata Sons would not have to comply to RBI rules once the company sheds its NBFC and CIC status, thus preventing a public listing.
What Tata Trusts' reorganisation proposal entails
The proposed reorganisation would lead to the merger of Tata Electronics Systems Solutions Private Limited (TESS) and Tata Consulting Engineers (TCE) with TSPL, the Tata Sons said in a press release on Monday. Such a move would mean the company would have its own operations and revenues.
The Trusts said its proposal to reorganise business and operations of TSPL was not a new pathway. “TSPL has, for almost 80 years out of its 100-year existence, always had operating businesses and operating revenues, which enabled it to fund its other, newer business ventures,” it said.
{{/usCountry}}The Trusts said its proposal to reorganise business and operations of TSPL was not a new pathway. “TSPL has, for almost 80 years out of its 100-year existence, always had operating businesses and operating revenues, which enabled it to fund its other, newer business ventures,” it said.
{{/usCountry}}The proposed reorganisation is aimed at reverting the company to its previous operating model, with its own operations and revenues, in addition to being a holding company for the Tata Group.
“This will also be in line with the previous classification (after 2004) by RBI of TSPL as a non-banking, non-financial company,” the Tata Trusts said.
Tata vs Tata conflict
The conflict between Tata Sons and Tata Trusts over public listing of TSPL erupted during the September 17 Tata board meeting. Opposing the prospective listing, Noel Tata said the Tata Sons board, led by the late Ratan Tata, had “unanimously” agreed that the company would stay “unlisted”.
Suggesting a restructuring exercise at the board meeting, Noel Tata reportedly proposed splitting the company into multiple entities, in a bid to prevent the listing of the Tata's holding firm.
Another point of contention was the board's “unanimous” vote to re-appoint N Chandrasekaran as executive chairman of the group. Noel called the move a “legal nullity” while emerging as the only board member to have voted against the re-appointment.